5th June 2014
Pressure is mounting on the Bank of England to rein in the UK’s booming property market as Halifax reports that in May house prices surged by 3.9% month-on-month, meaning they are now up by 8.7% over the past year.
The average house price was £184,464 in May, according to the lender, which was up from £177,524 in April and was the highest level since April 2008.
Despite this, house prices on the Halifax measure at £184,464 in May were still 7.6% below the all-time seasonally-adjusted high of £199,612 seen in August 2007.
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Howard Archer, chief UK & European economist at IHS Global Insight has described the data as “a real bolt from the blue and at face value unsettling for policymakers”.
He says: “It will certainly ramp up pressure on the Bank of England to come up with more measures to rein in the housing market at its Financial Policy Committee meeting late in June.”
The current trend in the market is that house prices are still enjoying significant gains despite a recent slowdown in mortgage activity. The Halifax data follows on from Nationwide reporting that house prices rose 0.7% month-on-month in May.
The ongoing strong rise in house prices comes despite a recent slowdown in mortgage activity notes Archer. He said: “Specifically, the Bank of England reported that mortgage approvals for house purchases fell for a third month running in April, and markedly, to be at a 9-month low of 62,918.”
The numbers do suggest that the introduction of new regulations on 26 April; the Mortgage Market Review (MMR), which introduced tougher credit checks for borrowers, has at least temporarily taken some of the steam out of housing market activity.
Archer adds: “At this stage, house prices still look more likely than not to see pretty robust increases over the coming months. We expect house prices to increase by around 6% over the rest of 2014 with gains across the country.”
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